The central government has announced an increase in the total debt ceiling of states to 5 per cent for the current financial year 2020-21.

The central government has announced an increase in the total debt ceiling of states to 5 per cent for the current financial year 2020-21. Until now, they could borrow only three per cent of the state's gross domestic product (GSDP) from the market. The move will provide additional funding of Rs 4.28 lakh crore to the states.

46 thousand crore to the states in April
Announcing the fifth and final installment of the economic stimulus package, Finance Minister Nirmala Sitharaman said the Center had paid Rs 46,038 crore to the states in April out of the tax collection, though the actual revenue collection was much less than the budget estimate. He said that despite the lack of resources before the central government, a total revenue deficit grant of Rs 12,390 crore was given to the states in April and May.

States get Rs 4,113 crore to stop Corona
Apart from that, in the first week of April alone, the state disaster relief fund of Rs 11,092 crore was announced in advance. The Ministry of Health also announced an additional Rs 4,113 crore for direct activities related to the prevention of the corona virus epidemic.

The RBI also took action for the states
The Finance Minister said that at the request of the Central Government, the Reserve Bank of India (RBI) had increased the debt collection measures for the states by 60 per cent. Apart from that, the period of continuous overdraft in a month was increased from 14 days to 21 days. Similarly, the period of overdraft in a quarter is allowed to be kept for 50 days instead of a total of 32 days.

The state will now be able to borrow a total of Rs 6.41 lakh crore
The already sanctioned borrowing limit for states during 202-21 is Rs 6.41 lakh crore. States have so far borrowed only 14 per cent of the border. 86 per cent authorized loan seam has not been utilized so far. However, the state has demanded an increase in the total borrowing limit from 3 per cent to 5 per cent of GSDP.

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What is the full provision of state debt
Giving details of raising the loan limit, he said the waiver of additional credit would be related to certain reforms. An increase of 0.50 per cent in the credit limit above the three per cent limit can be done unconditionally. In addition, a four per cent increase in four installments of 0.25-0.25 per cent will be linked to a clearly defined, comparable and viable improvement. A further 0.50 per cent increase would be allowed if three of the four reform targets were met.